Mergers & Acquisitions It Implications

Expansion into new markets Build revenue and market position Acquire expertise Create synergies and efficiencies: Shared overhead – cost reduction Economies of scale Sharing data (e.g., clients, markets) across the organizations Copyright 2010 AvaSea Services – All Rights Reserved 2

Estimate that between 50% - 70% of M&As fail Reasons for failure: Cultural differences Lack of transition planning Difficulties integrating IT between organizations Unexpected problems and complications Up to 50% of integration costs can be incurred by IT Copyright 2010 AvaSea Services – All Rights Reserved 3

Strategy • Picking the right model for integration Due Diligence • Getting the right information early in the process • Effectively implementing the merger / acquisition, Execution including anticipation of costs • Picking the right team Post Merger • Aligning systems and processes Integration * From “The Role of Information Technology in Mergers and Acquisitions”, by Peter Blatman, et al. Deloitte Consulting Copyright 2010 AvaSea Services – All Rights Reserved 4

Successful strategies include: Early involvement of IT Careful due diligence early in process – need to assess IT landscape of both companies to identify land mines Careful attention to budget – it is almost always more complicated and costly than anticipated Too often, early planning: Focuses on front-office (product management, sales, marketing) and Neglects back-office functions (HR, IT, operations) Copyright 2010 AvaSea Services – All Rights Reserved 5

Maintain Consolidate Goals: Goals: • Expertise of seller • Cost reduction • Access to newer markets • Market expansion Strategy: Keep status quo Strategy: Adopt technology & operations for both companies processes of acquiring company Synthesize Transform Goals: Goals: • Access to newer markets • Access to newer distribution channels • New business vision & processes Strategy: Choose best Strategy: Develop a new IT vision technologies & processes from and organize as per vision each company Copyright 2010 AvaSea Services – All Rights Reserved 6

Economies of Scale Shared Overhead  Establish single procurement  Cost reduction by eliminating function duplicate IT functions  Consolidate hardware,  Standardize operations (e.g., software, storage IT support, maintenance) Exchange of information M&A Success Systems Integration  Integrate customer data,  Cost reduction  Sales and marketing discover new revenue sources  Market expansion  Production  Streamline work-flow  New markets  Supplier management systems Copyright 2010 AvaSea Services – All Rights Reserved 7

Incompatible information systems and data repositories Divergent management philosophies Incongruent management practices IT systems that are not compatible and require large investments of time and $$$ to merge Difficult decisions to be made: Staff retention (or not) Legacy applications / systems – keep or not? Copyright 2010 AvaSea Services – All Rights Reserved 8

Lost revenue through poor execution Need to “keep the lights on” – conduct business as usual, while moving forward with transition Potential customer service issues with poorly executed transitions Data migration and security issues Adequate time for testing and QA activities under pressure from business to make merger deadlines Copyright 2010 AvaSea Services – All Rights Reserved 9

Management of existing contracts – potentially a huge project (multi-year) Software / hardware license and lease contracts Telecommunications Outsourced services All contracts must be reviewed for: Term (how much time left) Termination clauses and penalties Determination whether to continue or terminate, or modify terms Copyright 2010 AvaSea Services – All Rights Reserved 10

IT system integration is a mature discipline – most large IT organizations are experienced with integration projects IT in M&A projects: Require the same project / transition management disciplines on a larger scale Are frequently rushed and lack adequate planning Have an added complexity of cultural differences between the companies Copyright 2010 AvaSea Services – All Rights Reserved 11

Need clear statement from senior leadership about how business will deliver value through IT Set goals and priorities – can’t do everything at once – what is the vision? Create roadmap of enterprise architecture and plan for achieving end state Communications planning Shared services – what can be shared? HR/finance/ERP/support? Copyright 2010 AvaSea Services – All Rights Reserved 12

• Involve IT early Set / review • Identify objectives for M&A • What are expected benefits? • What are measures of success? strategy How achieved? • How measured? • What happens if not met? Create / update Set measureable targets & goals integration strategy detailed plan • Form integration team • Create & socialize white papers on strategy • Create communications plan Execute • Create PMO communications plan Perform due • Honest appraisal • Identify stakeholders diligence • Identify possible land mines • Plan for all levels of organization • Document & report issues, • Document & report issues, rework rework strategy plan 2010 AvaSea Services – All Rights Reserved

Staffing implications – critical to success Communication planning Cultural considerations Training Retention of key technical talent critical to success Copyright 2010 AvaSea Services – All Rights Reserved 14

Privacy and security Regulatory requirements might be different in different companies – particularly important for health and financial services Paramount importance to protect corporate data Data types may be incompatible between companies, requiring careful planning for merging Regulations include: Markets in Financial Instruments (MiFID) Sarbanes-Oxley (SOX) Payment Card Industry Data Security Standard (PCI DSS) – related to retail Copyright 2010 AvaSea Services – All Rights Reserved 15

CIO (IT) involvement early in merger planning activities Priority on thorough and detailed transition planning: requires project management and technical expertise Communications planning Early due diligence to identify majority of pitfalls – ideally done prior to signing M&A agreement Copyright 2010 AvaSea Services – All Rights Reserved 16

Merge systems? Migrate to one or the other? How compatible are the business processes that support and use the systems? What is role of outsourcing (or consultants) in: Current operations of each company Transition / project management Future operations? Outsourcing contracts may have large impact on M&A plans Copyright 2010 AvaSea Services – All Rights Reserved 17

What are your metrics for success? How will you know if you have achieved your vision? Examples of metrics: System cutovers without downtime Customer satisfaction measures Quality of data in combined systems, protection of data security System uptimes Business processes continuing without interruption Copyright 2010 AvaSea Services – All Rights Reserved 18

Due Integration Strategy Execution Diligence Planning Define Create Choose integration team Implement integration approach work plans and IT Assess risks & Develop work Check against strategies synergies plans and metrics Set targets & Estimate costs metrics measures Establish project management office (PMO) Copyright 2010 AvaSea Services – All Rights Reserved 19

SAS Acquires IDeaS SAS Institute: Leading data analytics co. ~2B$ Acquired IDeaS (MN) in 3Q 2008 co. ~ 20M$+ Expand current product offerings by using decision systems technology from seller Maintained existing product lines while exploring synergies Copyright 2010 AvaSea Services – All Rights Reserved 20

Oracle and Symantec Oracle : 27 acquisitions since Dec. 2006 Penetrating new markets, innovating through synthesis of new products and services Including Stellent Inc. from Minnesota Ran into issues (e.g., PeopleSoft acquisition) Symantec Inc.: 40+ acquisitions since Jan. 2001 Complementary products to expand the market for information security Includes Altiris and PC tools for IT management Copyright 2010 AvaSea Services – All Rights Reserved 21

Google Google : 63 acquisitions since 2001 Expanding technology reach both online & mobile Includes Android – popular in Smart Phones market Includes Double Click – used in Ad Sense Copyright 2010 AvaSea Services – All Rights Reserved 22

Mergers and Acquisitions: The Business Risks Associated with Merging IT. Mark Bargh, VP of AppLabs, 2007. Plugging IT into the Merger Equation. InfoWorld, April 24, 2000. Information Technology’s M&A Problem: A Briefing on Integration during Mergers & Acquisitions. Shawn Torkelson, Synapse SE. Information@synapse- se.com. The Role of Information Technology in Mergers and Acquisitions. Peter Blatman, Principal, et al. Deloitte Consulting LLP. 2008, Deloitte Development LLC. How to Manage Mergers and Acquisitions. Stephanie Davidson, IT World-An Open Exchange. April 5, 2001. Copyright 2010 AvaSea Services – All Rights Reserved 23

Experience driving results IT operations and transformation expertise Our specialties include: IT operations management, operations assessments Introduction of new computing technologies, such as Software-as-a-Service (SaaS), cloud computing Sourcing – insourcing and outsourcing Vendor and contract management IT financial analysis Copyright 2010 AvaSea Services – All Rights Reserved 24

Our leadership team Linda Langin, Principal 612.756.3685 llangin@avasea.com Uttiya Dasgupta, Director of Technology 651.204.3134 udasgupta@avasea.com Don Keysser, Director of Finance 612.710.0995 dkeysser@avavsea.com Copyright 2010 AvaSea Services – All Rights Reserved 25

Mergers & Acquisitions It Implications

by llangin on Mar 16, 2010

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